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MARKET RESEARCH

Why Demographics Are Crucial to Your Business
 

A new report projects trends in the United States' shifting demographic landscape and explains why it's important to know your customer.
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Who uses your products or services? Is it soccer moms, senior citizens, middle-class African Americans, recent immigrants, people in New England? Demographics might not be at the top of an entrepreneur's day-to-day worry list but it's a factor they ignore at their own peril, warns a new white paper published by Advertising Age. The study, titled "2010 America," forecasts changes in the demographic make-up of the U.S.--and the resulting business implications--in advance of the 2010 Census.

"Thinking about who your customers are and how they might be changing becomes a really, really low priority item" amid the daily chaos of overseeing sales, accounting, hiring, and technology, says Peter Francese, the paper's author. But ignoring demographic changes in your geographic market "really means you're not paying attention to your future," says Francese, a demographic trends analyst for Ogilvy & Mather, an international advertising and PR agency.

Francese speaks both from his experience analyzing demographics and as a former small business owner; he founded American Demographics magazine and ran it for more than 20 years. "If you're running a small business, the chances are pretty good that that small business is fairly geographically specific," Francese says. "There are plenty of states where no one household typology is more than a quarter of households."

The U.S. is more heterogeneous now than it was in past decades, but the key to business success lies in the details. According to Franchese's white paper, 85 percent of the country's recent population growth has taken place in the South and the West, and the generation entering adulthood in the next decade will be wildly more diverse than its forbearers. Only 54 percent of children under age 18 are white non-Hispanics compared with 80 percent of people over age 65. Furthermore, Hispanics will by this coming year cement their status as the nation's fastest-growing and largest minority group, with a population of 50 million.

These trends, long in the making, will disrupt some businesses while unlocking new opportunities for others. Consider the example of Antonio Swad. In 1986, he moved from Ohio to Dallas to open a traditional pizzeria. Realizing that  he was located in an area with a large concentration of Hispanic consumers, he changed his eatery's name to Pizza Patrón and focused his marketing efforts on the Latino community.

It wasn't an easy decision to make. Swad--who is of Italian and Lebanese descent--says he was completely unversed in Latino culture when he made the strategic decision to pursue that market. To attract Latino customers to his stores, he hired bilingual employees for customer interaction positions, dedicated time and money to developing a large community service presence and, most controversially, allowed customers to pay in pesos. The shift in focus paid off. Today, Pizza Patrón operates 95 stores in six states, with 13 more in the works.

Swad cautions entrepreneurs who would follow his example that they need to engage with a community--and examine its needs--before jumping in. "People look at the growth of the Hispanic community in the U.S. and their eyes will glaze over when they see the disposable income numbers," he says. "They'll think, 'Man, this is really going to be easy. I'm going to set up shop in one of those neighborhoods and I'm going to make a fortune."

The key to success, he observes, is to realize that "this is a community that you need to serve primarily and sell to secondarily."

Last updated: Dec 2, 2009




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